This invention pertains to investing of corporate working capital, and a method of utilizing the Internet for such investing.
Traditionally, a public company invests its working capital utilizing a xe2x80x9cbuy-and-holdxe2x80x9d strategy. Investments are always made in short term debt or debt xe2x80x9clookalikesxe2x80x9d. The investment is always of high credit quality to limit risks due to the possibility of issuer default. The investor purchases the security and holds it until receiving the par value of the investment.
The investor utilizing this strategy does not invest for capital appreciation. Rather, the corporate investor looks to protect the corpus and to collect interest or dividend income only. Par value may be facilitated by maturity, in the case of commercial paper, or by demand features, e.g., puts, auctions, etc., to assure that the investor will receive every cent of principal. Public companies, and private companies that qualify to be public, operate under a board policy outlining minimum credit acceptable standards of issuers, maximum maturity of a single investment, maximum duration and diversity delimiters to limit exposure to a single issuer, country, sector or other limits.
Typically a corporate investor executes this strategy by looking at a cash forecast, that typically includes an accounts payable forecast. From this the investor determines a principal amount available for investment and when the principal amount is needed. The individual responsible for investing places inquiries with several securities dealers to determine what investments that qualify with the corporate investment policy are available and what rates are offered. The corporate investor shops for investments. In theory, the investor then takes the highest offer and invests until maturity, When that investment matures, the process is repeated.
With the increasing use of the Internet as a backbone for electronic commerce, it would be highly desirable to be able to provide the corporate investor with the opportunity to make such investments via the Internet. However, to date no one has been able to efficiently offer an Internet based system to corporate investors. In large part, the reason is that Internet based investing has not been efficient because there are tens of thousands of offers made daily. Most of the offers are newly issued investments rather than investment that are traded in a secondary market. By way of example, if IBM issued commercial paper yesterday at 5.80%, today the may issue it at 5.85% and tomorrow at yet another rate.
In accordance with the principles of the invention, an Internet web site is hosted at which the traditional investment process is reversed. In the traditional process, corporate investors, having funds to invest, are offered various securities. Securities dealers offer the securities, directly or indirectly. Various securities are available at various rates and terms. The corporate investor, or his or her agents, typically shops around for the best available rate for the funds to be invested. The investor identifies the desired securities and invests in them. In the typical transaction securities dealers offer to sell a security having a specific yield and term The investor accepts the offer, transfers funds and receives the securities from the securities dealer.
In accordance with the principles of the invention, investors offer contractual agreements to invest specified amounts for specific terms for the best rate of return received within a predetermined time period. The amounts and terms are made available to securities dealers. Securities dealers have the opportunity to propose one or more investment instruments. The proposal is made with the understanding that if the proposed investment instrument is the best offer made within the predetermined time period that the proposal is deemed to be an automatic acceptance to provide the investment instrument.
In the illustrative embodiments of the invention, the investments are in newly issued short-term instruments.
In accordance with one aspect of the invention a method of providing financial services via an Internet web site is provided. A web site on the World Wide Web of computers known as the Internet is hosted to receive log-ons from corporate investors desiring to invest working capital. Each time the corporate investor logs on to the web site to initiate a transaction, the corporate investor is assigned an identification number to maintain anonymity for the transaction. The web site receives transaction request information from the corporate investor. The transaction request information includes an amount to be invested and a desired maturation term. The web site makes the transaction request available to securities dealers for a predetermined period of time. Transaction responses from a plurality of security dealers is received, each transaction response includes an identification of a debt instrument, an interest rate, and a maturation date. At the end of the predetermined period the transaction response having the most favorable terms is selected and communicated to the corporate investor.
In accordance with one aspect of the invention, the corporate investor at the time of making the transaction request is given a choice of selecting whether the transaction response having the most favorable terms is automatically accepted or the choice of making the acceptance conditional upon final approval of the corporate investor. Upon automatic acceptance or receiving acceptance from the corporate investor, the acceptance is provided to securities dealer providing the accepted response. In accordance with one aspect of the invention, acceptance is immediate and automatic upon the close of the predetermined time period in the first instance.
In accordance with another aspect of the invention, a method for using an Internet device to facilitate investments of working capital by corporate investors is provided. An investment request is inputted into said Internet device. The investment request comprises the amount to be invested and a maturity of capital to be invested. The Internet device receives a selected transaction response from one security dealer of a plurality of securities dealers via said central server. The selected transaction response is the most favorable transaction response received from a plurality of securities dealers during a predetermined time period. Transaction acceptance is inputted into the Internet device. Confirmation of transaction acceptance is outputted from said Internet device upon receipt from the central server.
In accordance with yet another aspect of the invention, a method for using an Internet device to facilitate placement short term debt instruments by security dealers is provided. The Internet device is coupled to a central server via an Internet connection. The Internet device receives from a central server an investment request and an identification number. The investment request comprises an amount to be invested and a maturity. The identification number is an identifier unique to a corporate investor. Responses to the investment request from a security dealer is inputted. The response is transmitted to the central server during a predetermined time period. The transaction response comprises an identification of a debt instrument, a rate and a term. The Internet device receives transaction confirmation from said central server if the transaction response is the most favorable transaction response received by said central server.
In the illustrative embodiment of the invention, a corporate investor logs onto the web site of the invention and identifies the amounts and maturity ranges of the investments desired. The corporate investors needs are posted on the web site keeping the identity of the investor secret. Securities dealers log on to the site and offer their best rates to the corporate investor. After a period of time, the posting would end. An on-line confirmation of the trade would be provided. The investor wires funds as is done conventionally and the securities dealer would deliver the investment.
In yet another embodiment of the invention, the system of the invention may aggregate a plurality of investment securities, where, for example, the size of the investment is such that the most advantageous or practical way to invest the amount is in more than one security. In this instance, when the investment offer is posted on a web site, it is noted that aggregation of securities is acceptable. In that instance, securities dealers may respond with the best instruments available. The system of the invention will determine the aggregation that may be formed from the plurality of instruments. At the close of the predetermined time period, each securities dealer proposing an instrument that has been identified as part of the best aggregation will be treated in the same manner as described above as having the best available instrument in the predetermined time period.